"The social system of private property and limited government is the only system that tends to debarbarize all those who have the innate capacity to acquire personal culture."
~Ludwig von Mises

May 14, 2010

Jimmy Cayne on the collapse of Bear Stearns due to market forces

The market's loss of confidence, even though it was unjustified and irrational, became a self-fulfilling prophecy. Subsequent events show that Bear Stearns' collapse was not the result of any actions or any decisions unique to Bear Stearns. Instead, it was due to overwhelming market forces that Bear Stearns, as the smallest of the independent investment banks, could not resist. Only a few months after Bear Stearns collapse, the same market forces caused the collapse and near-collapse of much larger institutions such as Lehman Brothers. The efforts we made to strengthen the firm were reasonable and prudent, although in hindsight they proved inadequate. Considering the severity and the unprecedented nature of the turmoil in the market, I do not believe there were any reasonable steps we could have taken, short of selling the firm, that could prevent the collapse that ultimately occurred.